FAQs: Tax and Social Security in Switzerland
How much are social security contributions, what does it cover and who pays it?
How much is paid in social security contributions depends on a worker’s salary level and the location of their employer. The payments are mandatory and cover all of the typical things that you would expect, including accident insurances and family allowances, for example. While most won’t see a direct benefit from this cost there is one exception: a portion of the social security is directed into a private pension fund, accessible upon reaching retirement age or having departed Switzerland.
Is social security mandatory?
It certainly is. There are typically two sides to the social costs – those paid by the employer and those paid by the employee. Those who are working in Switzerland on a contract basis often have to pay both sides.
Can a contractor use a UK Ltd company for the first six months of a Swiss assignment and pay tax in the UK?
The short answer is no. For an engagement of a six months duration the contractor would need either a Swiss company or more likely and practically, for someone coming into Switzerland especially for an assignment, a local payroll set up to remain compliant with the Swiss tax legislation.
Does the tax rate depend on where you live or rent in Switzerland?
There are 26 different cantons in Switzerland and every single one has their own tax regime meaning that the rate of tax to pay is completely dependent on where the worker is based. The determining factor comes down to whether the worker will be a Swiss resident and live in a property there. In this case, the tax rate is based on the place of residence. For cross border workers and contractors who are staying in hotels and travelling back to the UK at the weekends, the tax rate will be determined by where the employer is based.
Who makes payments of tax in Switzerland?
For temporary workers, the employer will make the necessary payments so, in the instance of contractors working with Capital, we would handle this and make all of the necessary calculations and deductions. This changes for Swiss residents or those working on a C permit who have to make the tax payments themselves.
How is it possible to lower the amount of tax to be paid in Switzerland?
Taxation is based completely on the salary level so, aside from earning less, there is little to be done to change the rate of tax due. The only way to reduce some of this tax burden is through expenses. If the worker is still tax resident in their home country and paying for a residence there, any costs incurred in Switzerland for accommodation and any travel between work and home locations can be offset, effectively gaining tax relief.
What’s the 1500CHF expense allowance and how do I apply for it?
This is an expat allowance in the form of a non-taxable deduction of 1500CHF monthly for any living expenses incurred if by those working Switzerland but who have a fixed address in their home country. Capital manages this for our clients so there is no need for them to apply.